Healthcare Conglomerate Associates, the former administrator of Tulare Regional Medical Center, is seeking $12.5 million from the hospital district as part of a lawsuit filed in Southern California.

According to the lawsuit, the hospital district breached an administrative contract when it failed to pay back a $7 million loan from HCCA used to front employee salaries.

"The loans are unpaid and are past due," said Marshall Grossman, attorney for HCCA. ""HCCA wants to recover the money that's past due."

The lawsuit was filed in Los Angeles County Superior Court.

In court documents, HCCA states it’s based in Southern California and, according to the contract, that’s where all legal matters will be litigated.

Last week, the hospital board authorized its attorneys to fight the claims.

In the lawsuit, HCCA, which took over administrative duties in May 2014, states the Tulare hospital was flourishing financially under HCCA.

“In the first six months HCCA was on board, the hospital had a $ 1.3 million net margin, and in the first full fiscal year under HCCA, the hospital recognized a net margin exceeding $7 million,” according to court documents. “Similarly, that first full fiscal year under HCCA saw a 10 percent operating margin.”

HCCA also hired personnel, about 500 employees, and gave raises, according to the documents. Tulare hospital also received improved financial ratings from national ranking agencies.

But, according to the lawsuit, a group of individuals, including former board members and doctors, sought to smear HCCA and remove them as financial administrator. The lawsuit names current board member Kevin Northcraft, Mike Jamaica and Senovia Gutierrez.

Dr. Benny Benzeevi, HCCA CEO, said he tried to meet with board members on several occasions without response back.

“Simply stated, these individuals have sought to gain and now claim control of the board with the intent to shred the [agreement] with no legal cause to do so,” according to the lawsuit.

In addition, the board’s actions go against what the agreement states, according to the lawsuit.

“The district’s actions … constitute anticipatory and actual breaches of the [contract], including a breach of the implied covenant of good faith and fair dealing, entitling HCCA to all lawful damages flowing therefrom,” according to the lawsuit.

Grossman also said the new board members refused to hear about a $22 million loan HCAA was working on to keep the hospital open.

"HCCA had potential funders," he said. "But it was never presented. "They just shut the door."

The hospital's closure could have been prevented, Grossman said. He also blames the new members for Tulare lacking a hospital.

"There was a major effort to engage the board in negotiations to avoid the hospital's closure," he said. "HCCA offer to step aside and allow a new management company take over and negotiate a new contract. But the board refused to negotiate in good faith. The results are terribly unfortunate."

In late October, the hospital board voted to temporarily suspend the hospital's license amid reports HCCA had sent out notices to employees who were expecting a shutdown.

"When the bankrupcy was filed, the district said it was an emergency," Grossman said. "The emergency was of the district's own making."

Grossman also accused the board of being unprepared to take over the hospital.

"When the bankruptcy was filed, the board had no plan in place to continue operation of the hospital," he said. "We are still waiting for that plan."

With bankruptcy procedures on-going, the HCCA lawsuit is suspended, but the claims will remain, Grossman said.

The hospital remains closed.

HCCA, according to the lawsuit, performed all conditions of the contract at all times.

Niki Cunningham, attorney for the hospital, denied the claims contained in the lawsuit when she announced the board’s decision last week. She wouldn't provide additional comment.

“No further comment or details are available at this time,” she said. “To provide additional details could jeopardize the district’s ability to prosecute the counterclaims.”